Would it be accurate to describe IKEA as the
most successful retailer of all time? As of yearend 2015 it generated global
sales of £35 billion in global sales. It operates 298 stores in 26 countries.
Conspicuously it is not a retailer that “floods” markets with stores: in the UK
it has only opened 19 of its “sheds” in the UK in 29 years.

It is simplistic in the extreme to make such a
bold statement about any retailer. However it has enjoyed enormous success and
continues to drive sales increases despite the changes that have taken place in
the retail arena globally.

How then has IKEA continued to succeed and
prosper? In this blog we consider the key factors for its success and assess
how it has responded to the technology developments.

It has been around since 1943, when it was
founded by Ingvar Kamparad and opened its first US store in 1985. A recent article
(Shouldberg, 2015; “Is IKEA the most influential retailers of the past 25
years?) identifies a number of its key success factors.

Firstly he argues that IKEA has transformed the
way in which we think about household furniture and how we buy it. While
previously people saw furniture items as expensive purchase items that were
made to last for around twenty year, IKEA debunked that perception and marketed
a broad range of items that were seen as clean and simple and most importantly
good value. While furniture items can be purchased more cheaply in deep discount
retailers, they tend to lack the focus on design and trendiness that IKEA are
famous for.

Its vertically integrated approach to sourcing
and manufacturing items is also identified as a key strength of the business. Can this model continue to thrive and prosper?
Many giants of the retail firmament have disappeared off the radar in recent
years. In the UK the most recent casualty was British Home Stores (BHS). How is IKEA responding to this so-called “new
era for retailing? I have noticed a couple of initiatives over the
past year or so that are worthy of mention and discussion.

IKEA is quickly re-defining the concept of
physical space. Once derided by the critics for erecting hideous sheds the size
of two football pitches and destroying the environment, it can be argued that
IKEA has made a virtue out of the relatively small number of such trading
outlets. Similar global retailers are furiously trying to rationalise their
store portfolio as more and more shoppers shop online, IKEA has not had the
same problem. The small number of large outlets continue to be destination
targets for shoppers.

In the last year or so IKEA has introduced a new
physical format to its operations: the order and collection point (IKEA).

Photo: Johan Hagberg

In the most recent one at Westfield Stratford
City Shopping Centre we can see some of its features. The store is hidden away near the food area in
the centre. The front of the IKEA operation is minimal: with floor to ceiling
glass and a steel frame network. It is contained within a 9,500 square feet
retail space. It has a number of display rooms: two bedrooms,
a functional kitchen area and a dining room. The most noticeable feature is that it looks
like an Apple store. The majority of the space is made up of Apple computers
and IPads. These allow shoppers to browse through the very large number of
items on the IKEA catalogue.

Shoppers can order what they want online, pay
for the order and pick it up on the next day. Alternatively they can elect to
pay a £35 fee to have it delivered to their home.

IKEA advisors are available to provide guidance
for the shoppers.

The order and collection point carried a minimum
number of items: forty, which can be purchased and taken away by shoppers if
they so desire. IKEA argue that this is a new form of concept
store and is meant to be a “point of inspiration” for shoppers. It allows
shoppers to engage with the items, albeit on a “virtual” basis.

We should note that in the broad context this is
not a new approach. IKEA is actually following the trends of similar retailers
in terms of expanding the range of channels through which shoppers can engage
with items, evaluate the items and make a purchase.

It can be argued that IKEA follows a logical
approach to retail development with this initiative. It means that in existing
markets, they need no longer worry about going through the time-consuming and
costly process of developing new store locations. Instead they can sell a very
large range of (in many cases) bulky items by making use of these much smaller
semi physical / virtual retail spaces. The Westfield opening potentially gives
IKEA access to over millions of shoppers who visit the shopping centre annually.

It has also embraced the concept of
“retailtainment”. This is evidenced by its opening of a pop-up do-it-yourself
restaurant and food store in London (Shoreditch) at the beginning of September
2016. This creates the combined concept of a shopping and dining experience.

The pop-up outlet operates for three to four
weeks and then closes down.

It combines a Swedish food store, a virtual
reality kitchen booth, a kitchenware store and a lecture theatre for workshops
which address cookery-based themes. It opens from 10am to 10pm. It also
contains a Dining Club, where members can book the venue to host a brunch,
lunch or dinner party for up to twenty individuals.A sous-chef is available to prepare the meal.
Typically Scandinavian dishes feature such as venison and wild mushrooms.

The motivation for this “innovative” initiative
stemmed from a survey of 2,000 shoppers which revealed their passion and
enthusiasm for celebrity chefs and TV programmes such as The Great British
Bake-off. In tandem with these initiatives, IKEA plans to
open stores in India and Serbia in the coming months. How do we assess this strategy?

IKEA clearly is integrating its physical and
virtual channels in line with many similar operators. Overall it is following
rather than driving a trend.

Its initiative with the pop-up store is
imaginative and provides it with an opportunity to tap into the psych of the UK
shopper. The “pop-up” concept is relatively inexpensive to set up. If it works
it can be extended to other areas; if it flops it can be terminated without too
much financial pain to the company. In terms of overall performance IKEA is
certainly hitting the numbers in terms of sales and profitability. Recent
financial figures reveal that it has experienced an increase of over seven per
cent in sales (£34.2 billion) year on year for 2016. It is on track to become
the world’s leading multi-channel home furnishings retailer.

So it is full steam ahead for IKEA. Let’s
monitor its performance over the next couple of years.

//Sean Ennis

I leave you with one statistic. World-wide, it
sells one of its Billy Bookcases every ten seconds.